Treasury Yield & Term Premium Decomposition Workbench

Macro Scenario Presets SELECT ERA

Macro Drivers (Live Levers) DIRECT INPUTS

Expected 10Y Inflation Breakeven 2.15%

Survey/TIPS breakeven anchor for medium-term price stability.

Expected Avg Policy Rate (10Y Path) 3.25%

Market-implied path of the Fed Funds policy rate over 10 years.

Net Treasury Issuance Shock (Ann) +$1,800 B

Annual gross supply expansion straining dealer balance sheets.

Foreign Official Demand Delta -$350 B

Central bank reserve diversification out of long-dated USD debt.

Fed QT Monthly Balance Sheet Runoff $60 B/mo

Quantitative tightening shifting paper onto private capital.

Duration Risk Premium Multiplier 1.25x

Investor compensation required per unit of interest rate variance.

10Y Nominal Yield

4.98%

Total Borrowing Cost

Policy Path Exp

3.25%

Avg Expected Overnight

10Y Breakeven Exp

2.15%

Cooling Inflation Anchor

ACM Term Premium

+158 bps

+1.58% Duration Risk

The 25-Year Paradox: Fiscal Supply Driving High Yields

While cooling inflation breakevens (2.15%) indicate minimal investor fear of runaway CPI, 10Y nominal borrowing costs are sustained near 4.98% due to an extraordinary Term Premium (+158 bps). Heavy Treasury debt issuance (+$1,800B) coupled with reduced foreign reserve buying (-$350B) and Fed QT forces private bondholders to demand steep duration risk concessions.

TREASURY YIELD CURVE (2Y, 5Y, 10Y, 30Y) 10Y-2Y: +42 bps

10Y YIELD FACTOR DECOMPOSITION ACM / KIM-WRIGHT MODEL

Historical 25-Year Regime Comparison FACTOR ATTRIBUTION

REGIME ERA	10Y NOMINAL	EXP POLICY PATH	10Y INFLATION	TERM PREMIUM	PRIMARY DRIVER